Abstract

China’s Twelfth Five-Year Plan (2011–2015) aims to achieve a national carbon intensity reduction of 17 % through differentiated targets at the provincial level. Allocating the national target among China’s provinces is complicated by the fact that more than half of China’s national carbon emissions are embodied in interprovincial trade, with the relatively developed eastern provinces relying on the center and west for energy-intensive imports. This study develops a consistent methodology to adjust regional emissions-intensity targets for trade-related emissions transfers and assesses its economic effects on China’s provinces using a regional computable-general-equilibrium (CGE) model of the Chinese economy. This study finds that in 2007 China’s eastern provinces outsource 14 % of their territorial emissions to the central and western provinces. Adjusting the provincial targets for those emissions transfers increases the reduction burden for the eastern provinces by 60 %, while alleviating the burden for the central and western provinces by 50 % each. The CGE analysis indicates that this adjustment could double China’s national welfare loss compared to the homogenous and politics-based distribution of reduction targets. A shared-responsibility approach that balances production-based and consumption-based emissions responsibilities is found to alleviate those unbalancing effects and lead to a more equal distribution of economic burden among China’s provinces.

Notes

Acknowledgments

The authors thank Eni S.p.A., ICF International, Shell International Limited, and the French Development Agency (AFD), founding sponsors of the China Energy and Climate Project. We are also grateful to the AXA Research Fund, which supported Marco Springmann’s doctoral research. We further acknowledge support provided by the Ministry of Science and Technology of China, the National Development and Reform Commission, and Rio Tinto. This work was also supported by the MIT Joint Program on the Science and Policy of Global Change through a consortium of industrial sponsors and Federal grants. We are also grateful to John Reilly, Sergey Paltsev, Henry Jacoby and Audrey Resutek for helpful comments and suggestions on earlier versions of this manuscript.

Appendix 1: Elasticities of Substitution

Table 5

Reference values of elasticities of substitution in production and consumption

Parameter

Substitution margin

Value

\(\sigma _{en}\)

Energy (excluding electricity)

1

\(\sigma _{enoe}\)

Energy—electricity

0.5

\(\sigma _{eva}\)

Energy/electricity–value-added

0.5

\(\sigma _{va}\)

Capital—labor

1

\(\sigma _{klem}\)

Capital/labor/energy—materials

0

\(\sigma _{cog}\)

Coal/oil—natural gas/fuel gas in ELE

1

\(\sigma _{co}\)

Coal—oil in ELE

0.3

\(\sigma _{gf}\)

Gas—fuel gas in ELE

10

\(\sigma _{hr}\)

Resource—Capital/labor/energy/materials in hydro ELE

1

\(\sigma _{nr}\)

Resource—Capital/labor/energy/materials in nuclear ELE

1

\(\sigma _{wr}\)

Resource—Capital/labor/energy/materials in wind ELE

1

\(\sigma _{var}\)

Resource—Capital—Labor in AGR and OMN

1

\(\sigma _{rklm}\)

Capital/labor/materials—resource in primary energy

0

\(\sigma _{ct}\)

Transportation—Non-transport in private consumption

1

\(\sigma _{ec}\)

Energy—Non-energy in private consumption

0.25

\(\sigma _{c}\)

Non-energy in private consumption

0.25

\(\sigma _{ef}\)

Energy in private consumption

0.4

\(\sigma _{l}\)

Leisure—material consumption

1

Appendix 2: Emissions-intensity targets by Province

Table 6

Emissions-intensity reduction targets (%)

Region

PRD

POL

CON

SHR

ANH

17.4

17.0

16.3

16.9

BEJ

17.4

18.0

85.0

51.2

CHQ

17.4

17.0

33.9

25.6

FUJ

17.4

18.0

40.8

29.1

GAN

17.4

16.0

0.0

8.7

GUD

17.4

20.0

18.4

17.9

GXI

17.4

16.0

7.1

12.2

GZH

17.4

16.0

0.0

8.7

HAI

17.4

11.0

86.2

51.8

HEB

17.4

18.0

0.0

8.7

HEN

17.4

17.0

6.3

11.9

HLJ

17.4

16.0

13.9

15.7

HUB

17.4

17.0

1.7

9.6

HUN

17.4

17.0

15.1

16.2

JIL

17.4

17.0

11.7

14.5

JSU

17.4

19.0

31.6

24.5

JXI

17.4

17.0

16.2

16.8

LIA

17.4

18.0

7.2

12.3

NMG

17.4

16.0

0.0

8.7

NXA

17.4

16.0

20.2

18.8

QIH

17.4

10.0

0.0

8.7

SHA

17.4

17.0

10.1

13.8

SHD

17.4

18.0

16.5

17.0

SHH

17.4

19.0

14.3

15.9

SHX

17.4

17.0

0.0

8.7

SIC

17.4

18.0

15.6

16.5

TAJ

17.4

19.0

17.2

17.3

XIN

17.4

11.0

11.9

14.7

YUN

17.4

17.0

0.0

8.7

ZHJ

17.4

19.0

90.8

54.1

Eastern

17.4

18.6

27.8

22.6

Central

17.4

16.8

7.9

12.6

Western

17.4

15.7

9.0

13.2

China

17.4

17.4

17.4

17.4

Appendix 3: Economic Impacts by Province

Table 7

Percentage changes in welfare as measured by equivalent variation of income